Obligations and Contracts Law

• The document discusses obligations and contracts, focusing on general provisions, the nature and effects of obligations, different kinds of obligations, and their extinguishment

General Provisions (Arts. 1156 – 1162)

• An obligation is a juridical necessity to give, to do, or not to do
• Juridical necessity makes an obligation enforceable in court, allowing civil action if grievances need redress.
• A civil action allows a party to sue for enforcement, protection, or redress of a right.
• Civil action results in civil obligation

Natural vs. Moral Obligations

• Civil obligation differs from natural and moral
• Natural obligations were formerly civil obligations but became unenforceable due to prescription
• Moral obligations aren’t enforceable from the beginning but may be complied with due to human factors.

Elements of an Obligation

• Active subject (obligee/creditor/plaintiff): one who has the right
• Passive subject (obligor/debtor/defendant): on who has the duty
• Object: prestation must be observed by the debtor/obligor
• Must be licit, possible (physically and juridically), and determinate/determinable

Cause

• Must have pecuniary value
  • Vinculum Juris: juridical/legal tie; binds the parties to the obligation
  • Causa (causa debendi/causa obligationes): why obligation exists

Sources of Obligation (Art. 1157)

• Law (Obligation Ex Lege): expressly/impliedly set forth, never presumed.
  • ex: obligation to pay taxes
• Contracts (Obligation Ex Contractu)
  • Must be complied with in good faith, acting as the "law" between parties.
  • Neither party can unilaterally evade obligations unless authorized or assented to by the other party.
  • Parties can freely enter stipulations if not against law, morals, good customs, public order/policy.
• Quasi-Contract (Obligation Ex Quasi-Contractu)
  • Juridical relation from lawful, voluntary, unilateral acts ensuring no unjust enrichment.

Kinds of Quasi-Contract

- Negotiorum gestio: unauthorized management when someone voluntarily manages abandoned property/business without authority.
- Solutio indebiti: undue payment when someone mistakenly delivers something to another party.

• Delicts (Obligation Ex Maleficio or Ex Delicto)
  • Every person criminally liable for a felony is also civilly liable (RPC Art. 100)

Scope of Civil Liability

- Restitution
- Reparation for damage caused
- Indemnity for consequential damages

• Quasi-Delict/Torts (Obligation Ex Quasi-Delicto or Ex Quasi Maleficio)
  • Act/omission from fault/negligence causing damage without pre-existing contractual ties.

ELEMENTS:

• Act or omission exists
• Fault or negligence is attributable to the person charged
• Damage or injury happened
• Direct cause-effect link exists between fault/negligence and the damage/injury.
• No pre-existing contractual relation exists

Negligence

• Usually arises from negligence
• Failure to protect another person's interests through care, precaution, and vigilance as circumstances demand.

Nature & Effects of Obligations (Arts. 1163 – 1178)

• Personal Obligations: obligations to do/not to do
  • Positive: obligation to do
  • Negative: obligation not to do
• Real Obligations: obligations to give

Types: - Determinate/specific: object is designated/segregated. - Generic: object is designated by its class/genus. - Limited Generic: generic objects limited to a specific class

Duties of Debtor in Obligation to Give Determinate Thing (Arts. 1163, 1164, 1166)

• Preserve the thing with the diligence of a good father of a family.
  • Ordinary care, like a reasonable person would take with their own property.
    • Standard according to law, stipulations, or diligence of a good father.
• Deliver fruits of the thing from the time the obligation to deliver arises
  • General rule: upon contract perfection
  • Exceptions: stipulation about creditor's rights, suspensive condition/period fulfilled.
• Deliver it's accessions and accessories
• Deliver the thing Accessory: things for embellishment/completion of principal thing.
• Pay damages for breach due to delay, fraud, negligence or contravention

Duties of Debtor in Obligation to Give Generic Thing

• Deliver thing of neither superior nor inferior quality.
• Pay damages for breach.

Remedies for Creditor in Non-Performance (Arts. 1165 – 1168)

• Specific Performance: Debtor performs prestation.
• Substitute Performance: Someone else performs at debtor's expense
• Equivalent Performance

Breach of Obligations (Arts. 1170 – 1174)

• Voluntary: debtor’s fault includes:

Fraud (Dolo)

• Deliberate/intentional evasion. Implies malice/dishonesty, not mistake.
• synonymous to bad faith

Types - Causal Fraud (Dolo Causante): employed in contract execution. - Purpose: consent to enter contract results: vitiation of consent, voidable contract gives: right to annul.

- Incidental Fraud (Dolo Incidente): fraud in existing obligation performance.
      - Purpose: evade obligation results: breach gives: right to claim damages

• Future fraud can’t be waived but action for damages on already committed fraud can be renounced.

Remedies For Defrauded Party

• Insist on specific performance (Art 1233)
• Resolve contract (Art 1191)

Negligence (Culpa)

• Consists of omitting diligence required by the obligation's nature and circumstances.

Kinds

• Quasi-Delict (Culpa Aquiliana / Culpa Extra Contractual): source of obligation; substantive/independent.
• Contractual Negligence (Culpa Contractual): negligence is incident of obligation performance with pre-existing contractual relation.
• Negligence can be waived unless nature of obligation/public policy requires a different standard of care.
• Exceptions exist for common carriers.

Fraud vs. Negligence:

• Deliberate Intention: fraud has it, negligence lacks it resulting: fraud liability can’t mitigate but negligence can
• Waiver: future fraud cannot be waived, but future negligence negligence waiver may be allowed, though Negligence requires proof, while contract's breach is prima facie sufficient Diligence in employee selection/supervision stands as defense.

Effects of Creditor’s Contributory Negligence

• General rule: reduces/mitigates damages; if creditor’s negligence proximately causes damage, they can’t recover.

Delay (Mora)

• Ordinary Delay: failure to perform on time
• Legal Delay / Default: failure constituting breach

Requisites of Delay

• Obligation is due, demandable, and liquidated.
• Debtor fails to perform positive obligation when due
• Demand from creditor for debtor to comply
• Debtor fails

Kinds of Delay

• Mora Solvendi: debtor's default
• Ex re: in real obligations
• Ex persona: in personal obligations
• Requisites: due/enforceable/liquidated, non-performance, demand unless waived

General rule

• Obliged incur delay when obligee demands fulfillment, unless exceptions apply.
  • Exceptions: law/obligation says otherwise, nature of obligation indicates time is critical, demand is useless

Effects

• Debtor at fault, debtor must pay interest/damages
• For determinate thing: liable for fortuitous events, resolution

Mora Accipiendi: creditor's default when unjustifiably refusing performance.

• Debtor offers performance, can comply reasonably, but creditor refuses without cause

Effects

• Debtor's responsibility caps at fraud/gross negligence.

• Debtor is relieved risk of lost thing

• Creditor bears risk, expenses for preservation are chargeable, debtor need not pay interest, creditor pays damages

• Debtor can consign the thing

• Compensatio Morae: both parties are in default, no actionable default for either party.

• Reciprocal obligations require proper compliance to begin delay.

Fortuitous Event

• An event that could not be foreseen, or which though foreseen, was inevitable

Requirements

• Breach is independent of debtor’s will
• Event is unforeseeable/unavoidable
• Debtor is unable to fulfill properly
• Debtor has no participation / didn't aggravate injury

Rule On Fortuitous Event

• General Rule: no liability
• Exceptions: law says otherwise, contract says otherwise, nature requires risk assumption, obligor defaulted/promised same thing to multiple parties

Effect

• Determinate obligation is extinguished; generic is not

Art. 1176: Receipt of principal without interest implies interest is paid; later installment implies prior installments are settled.

Principle in Art. 1176

• Receipt must specify the installment for which payment is made before presuming prior payments.

Art. 1177: Creditors can pursue debtor’s property and rights (excluding personal ones), plus impugn fraudulent acts.

Art. 1178: Rights from obligation are transmissible unless stipulated otherwise.

Remedies Available To Creditors for Satisfaction of Claims

• Exact fulfillment via specific/substitute performance with damages
• Resolve contract in reciprocal obligations & gain damages
• Pursue debtor is leviable property, not exempt from law
• Accion Directa (Arts. 1729 and 1652):
  • Lessor goes to sublessee
  • Laborers claim from the owner
• Accion Subrogatoria
  • Subrogation to debtor rights

Requisites

• Debtor owes the right of action to the creditor
• Creditor is prejudiced by debtor's inaction
• Creditor exhausts debtor's properties
• Debtor has insufficient assets to pay debts
• Accion Pauliana: Rescind debtor act for fraud (Arts. 1380-1389)

Requisites

• Credit favors plaintiff
• Debtor's damaging acts benefited others
• Rescission benefits creditor
• Creditor has no legal recourse
• Acts are fraudulent

Different Kinds Of Obligations

• Primary Classification under Civil Code: Demandability, nature of object, plurality of subject, performance and sanctions

Demandability:

• Pure: Enforceable immediately without condition/term -Conditional: Fulfillment required
• With period: Enforced after a certain time

Plurality of Object: -Simple: Single object -Alternative: Multiple objects, but only one is due -Facultative: One object, debtor can substitute

Plurality of Subject:

• Simple: Single debtor/creditor
• Joint: Multiple parties, proportionate share is owed
• Solidary: Multiple parties, each liable for the whole amount

Primary Classification under Civil Code (cont.)

Performance:

• Divisible: Can be performed in parts
• Indivisible: Must be performed entirely

Sanctions:

• With/without penal clause: Penalty included for breach

Pure and Conditional Obligations

• Pure: Enforceable immediately
• Conditional: Depends on uncertain event

What is a Condition:

• Future, uncertain event (or past but unknown)

Types of conditional obligation

• Suspensive: Obligation arises upon event

Rules on Loss, Deterioration, Improvements During Suspensive Condition (Art. 1189)

• Improvement: At debtor use
• Deterioration/loss: Debtor pays of damages

Creditor choice Rescission or damages

REQUISITES ARTICLE 1189

• The obligation must be a real obligation

• The object is a specific or determinate thing

• Subject to condition fulfilled

• Resolutory: Obligation ends upon event

Impossible and Illegal Conditions

• General rule: It will annul
• Exceptions: Pre-existing, devisable etc

Obligations With a Period

• Payable when Able: with a period

REMEDY: Agreement or Court set term KINDS: Resolutory or Suspensive

Term (Period): Fixed interval Condition: Uncertain fact

When courts can fix/whose benefit for a certain time that is designated. General rule presumed established for both creditor and debtor.

Loses right to period, insolvency etc.

Alternative Obligations (Arts. 1199 - 1206)

• Facultative: One act but can be in substitute

Effect/Choice of Loss or Object:

Alternative vs. Facultative: - Alternatives: variety of options - Facultatives: right of choice to debtor

Joint And Solidarity Obligations

General note:

• Joint: Presumption exist, many exception
• Liability: Does not affect the other
• Solidary exists:
• when expressly stated that there is solidarity
  • when the law requires solidarity

Effects of joint liability.

  -Effect of Breach- if cannot fullfill, innocent joint debtor shall not

• Joint Debtor is liable proportionally.
• Creditor asks to be payed proportionately

Solidary

• Must be express

Divisions for Obligations

(1) Divisible: Susceptible for performance (2) Indivisible: Not easily applied

• Not with accessory undertaking to extent is bound to pay

Modes of Extinguishment

Obligations and Requisites

- Payment

(1) Respect, presentation (2) Must be w/ complete ness (3) indiviisbility

• with respect w/ parties
• Note made by good faith with those in credit

Payment to 3rd party

• Validity proof (1) Payment of debt is same

Where and What should be paid

• Place designated in the obligation (1) if no expense where can be found
• Time: stipulated Note: "time does not pass" Rules/Form Payments design for which two or more.

Requisites/Application Payments

• must apply the type of debts.

• Debtor has choice or consent.

• Application of Debtor: (1) If no, creditor does

• Application to the must onerous

Dacion En Pago:

(1) mode of extinguishing by debtor (1) creditor provides sale etc

Condition Valid

Cession

(1) Assignment in creditor assign (2) voluntary agreement of creditors, for more debt

Effect of assignment

• debtor to debt is same
• If creditors will be credited the amount

Tend & Assign:

• The actor offer is just due, has the power for what's assign.

Consignation

• Court of judial authority etc Note: "prior of payment/tender"

• Validity requires good consignation (1) Existence of valid (2) 3rd Party can't have say.

• Debtor cant ask judge to order the obligation etc.

W/O Prior Tender

(1) If no receipt (2) Multiple creditors claiming for the right

Thing of Loss for thing due

If there is loss, perishes thing/ object goes commercially. Impracticality for a certain thing.

Obligation to Deliver Thing

Exceptions: debtor causes harm by fortuitous event

Obligation to GENERIC

Divisible Indivisible Art 1223 1225

1] Divisible to partial performance, Express and units .2] Indivisble not capable, not partial Law/ Party

Obligations With a Penal Clause

• Accessory to claim in the act of breach (1) if there’s not penalty/claim its void (2) cant reduce price
• Condonation - remissions of debt
• voluntary act , donations express must be subject Requisite"
  • (1) must be agreement from others
• Confusion or merger of rights debtor is merged with another

Compensation set off/ reciprocally debtors

• Requisites* (1) Both parties must be in debt: creditor and debtor (B) Both parts have to consist some , one C) Both in debt

Novation

Change substitution Requisites: (1) Valid Obligation (2) Extinguised Effect of Novations, etc Kinds i. Subjectivity ii. subsiting someone else iii 3rd party is in writing .Deiagitiosn Initiative W, All parties, sub to fill W for reimbursement

Explore key concepts in obligations and contracts law. Test your knowledge of standard of care, rights to fruits, accessions, and remedies for non-performance. Learn about fraud, pure obligations, and uncertain events.